Why we’re removing this fund from Select 50

Every three months we work with Fundhouse, our fund selection partner on Select 50, to refine our best buy list. This quarter we are removing Balanced Commercial Property Trust (BCPT), following an agreed takeover of the real estate investment trust by Starwood Capital.

The deal was triggered by a strategic review of the trust designed to address a very large discount to the value of its underlying assets. BCPT is not the only property trust to have suffered from a discount to NAV, but at nearly 30% it was very wide. Since the announcement of the proposed takeover, the share price has moved back towards the 96p value of the offer, reducing the discount significantly.

The takeover by Starwood required approval from 75% of shareholders. It was secured on 25 October and last dealings in the trust’s shares are expected to take place in the middle of November. As a consequence, Fundhouse has recommended the removal of the trust from Select 50.

Following the removal of the trust, investors can gain exposure to real estate via the iShares Environment & Low Carbon Tilt Real Estate Index Fund.

Fundhouse continues to look for opportunities among other closed-ended commercial property funds, but it doesn’t have plans to immediately replace BCPT on Select 50. It says:

“In terms of other closed-ended commercial property options, many of them focus on a single property sector (too specialised), trade at wide discounts relative to history, or are quite small in size (so vulnerable to corporate activity too). Property (and investment trusts more broadly) is currently a challenging area, and we did not find a trust we felt was sufficiently diversified and where we were comfortable regarding the risk of corporate activity too.”

The removal of BCPT brings the total size of the Select 50 list to 46 funds, which we are comfortable with for now, but we hope to bring the list back to the 50 strong target in due course, as and when suitable funds are identified.

The latest change to Select 50 follows a more substantive review three months ago when we:

• replaced the Comgest Growth Emerging Markets Fund with the Fidelity Sustainable Emerging Markets Fund
• replaced the Comgest Growth Europe Fund with the Barings Europe Select Fund, which we featured in our most recent investment forum (catch up with that event below)
• replaced the T Rowe Price US Smaller Companies Fund with the Brown Advisory US Smaller Companies Fund
• removed the Edinburgh Worldwide Investment Trust
• removed the M&G Global Macro Bond Fund, following the retirement of its manager Jim Leaviss 

Rory Maguire and Tom Dunster from Fundhouse joined us at Fidelity’s London offices for our recent investment forum, answering questions from investors about their approach to selecting funds for Select 50.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Select 50 is not a personal recommendation to buy or sell a fund. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Shares in investment trusts are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of  Fidelity’s advisers or an authorised financial adviser of your choice.